Vietnam on brink of Thai baht-style currency crisis of 1997 ?

elnino2008 · 19/06/2008, 20:46

http://business.timesonline.co.uk/tol/business/economics/article4127593.ece

Rhys Blakely, Bombay

Vietnam, until recently a poster child among emerging economies, is on the brink of a currency collapse, which would mirror the rout of the Thai baht that sparked the Asian crisis in 1997.

This week the State Bank of Vietnam effectively devalued the dong 2 per cent against the dollar, a move that analysts said was designed to head off a speculative attack on the embattled currency.

The move highlighted concerns that Vietnam, where consumer price inflation is running at more than 25 per cent, is poised to suffer an exodus of foreign-controlled capital.

The nation''s benchmark equities index has lost 60 per cent of its value since January, making it the world''s worst performing stock market. Vietnam''s trade deficit for the year to May, at $14.4 billion (Ê7.4 billion), exceeds the $12.4 billion shortfall for 2007.

Claire Innes, at Global Insight, said: "The weakening of the currency is principally aimed at preventing speculative attacks."

Matthew Hildebrandt, an economist at JP Morgan, said the move "will embolden the view that Vietnam is on the verge of a [balance of payments] crisis and larger devaluation."

On the streets of Vietnam''s cities, there has been growing disquiet over the fate of the dong. Vietnam''s black-market currency exchange rate has reportedly jumped to a record high of more than 18,000 dong to the dollar - above last week''s official rate of 16,268.

Sherman Chan, at Moody''s economy.com, said: "A sense of dâja vu and fears of sky-rocketing inflation are causing individuals and merchants to hoard rice, cement and steel, a return to old habits formed back when annual inflation exceeded 60 per cent."

She added that inflationary pressures has prompted a stampede into gold: "The price of gold has tended to be a reliable proxy for the public''s assessment of the Government''s ability to stabilize the economy. Gold''s price in recent months underscores their stunning lack of confidence."

The situation underscores the sharp reversal of sentiment over the Vietnamese economy, which, until last year, was among the fastest growing in Asia. In March 2007, the combined value of stocks on the Ho Chi Minh City and Hanoi stock exchanges stood at about $29 billion õ?" up from less than $1 billion in 2005.

Economists say that a recent suggestion by the Vietnamese Government that it does not have sufficient foreign reserves to fend off an attack from speculators, who may bet on the dong suffering a sudden and sharp drop, was ill-timed.

Ms Chan said: "The bitter lessons of the Thais and Indonesians in 1997 are clear: even $22 billion can be used up very quickly when the currency is under heavy pressure from determined and well-financed speculators.

"The only way to regain credibility is by employing serious tools to attack the roots of the problem, which are an overheating economy and excessive inflation."

She added: "To prevent a currency and balance of payments crisis, it is necessary that the Government take a tough tightening stance. This could dampen growth in the near term but the benefits outweigh the downside, as it would take an extended period for an economy to recover from a major crisis."

elnino2008 · 19/06/2008, 21:03

Hanoi fights inflation juggernaut

It has to be one of the worst ever stock market runs. Ho Chi Minh City fell every trading day in May and early June amid gloom over skyrocketing inflation and an economy seemingly going off the rails.

By the time the market had finished its 25-day slide last week, the index was down 60 per cent from the start of the year, making it the world?Ts worst performer.

Vietnam?Ts problems illustrate the difficulties of many emerging market countries as they struggle to keep a lid on inflation.

After years of growth, these economies are facing questions over how to contain rising prices, exacerbated by the soaring value of oil and food.

Inflation in the 20 largest emerging market economies rose to 6.9 per cent in March from 4.5 per cent in March last year, according to Fitch.

In Vietnam, inflation hit 25 per cent at the end of May, the highest level since 1993.

However, there are signs Vietnam?Ts market may be at a turning point as Hanoi signals a growing determination to battle inflation even if it means sacrificing growth.

On four of the past five trading days, Ho Chi Minh City has risen, gaining nearly 4 per cent in total. Volumes have increased from $2.4m on June 10 ?" the day before it hit bottom ?" to $20m on Tuesday.

?oI am not saying this is the end of the bear market,? Kevin Snowball, a director at Ho Chi Minh City-based PXP Asset Management, said.

?oIt may be that it turns out to be the proverbial dead cat bounce. But for the time being, we are stepping back and having a look at whether there is any conviction on the upside.?

Selling pressure seemed to ease after the State Bank of Vietnam raised an interest rate last week to 14 per cent from 12 per cent, its second rate rise in three weeks, as part of an increasingly aggressive monetary tightening.

Previously, it had relied on administrative edicts and mandatory bond purchases by banks to drain liquidity.

?oThe central bank is starting to develop a more sophisticated monetary policy framework, one which uses interest rates in a more transparent way,? Benedict Bingham, the IMF?Ts resident representative in Hanoi, said.

But many still worry over whether Hanoi is doing enough to curb its spending and spending by state-owned enterprises ?" a factor in the overheating.

?oThe fiscal stance for 2008 is not yet clear to investors,? Mr Bingham said.

?oThe government needs to put the pieces together and answer the basic question that everyone is asking, which is: Is fiscal policy going to pull in the same direction as monetary policy??

The jury is out on whether Vietnam, like the rest of the emerging market universe, will be able to tackle the serious problems that inflation is creating for its economy and markets.

Despite the current turbulence, foreign companies remain upbeat about Vietnam?Ts long-term prospects, with pledging rising levels of foreign direct investment. And while Vietnamese equity investors have sold relentlessly, foreign players have remained broadly positive, pouring around $340m into Vietnamese equities so far this year.

Sriyan Pietersz, head of research at JP Morgan, says foreigners remain interested in Vietnamese stocks, especially at the current price levels. But he says the market?Ts narrow trading band - just two percent up or down every day in recent months - has prevented the market from clearing, thus prolonging its downward slide.

Authorities narrowed the 5 per cent daily trading band to just 1 per cent in March to try to stabilise the market, and later widened the band to two per cent. On Thursday, the trading band will widen to three percent, though Mr Pietersz suggests that further widening is needed.

?oThe fundamentals are being obscured by the technical issues,? he said of the market. ?oWe are not seeing the real prices. Liquidity can?Tt get in and out of the market. They need to lift the technical barriers, get rid of the trading band, and then the market will find its proper level.?

http://www.ft.com/cms/s/0/081cbb6c-3d51-11dd-bbb5-0000779fd2ac.html?nclick_check=1

Hết đỡ nổi

KOD82 · 19/06/2008, 21:04

Bác có thời gian dịch ra tiếng Việt giùm

Thanks

Để vậy ai hiểu ?

Vietnam on brink of Thai baht-style currency crisis of 1997 ?

elnino2008 Thành viên quen thuộc

elnino2008 Thành viên quen thuộc

KOD82 Thành viên rất tích cực

Chủ đề cùng chuyên mục

Chia sẻ trang này